Western tilt

In his decade-long term as Chief Minister of Gujarat, Narendra Modi made as many as four official visits to China, and was fulsome in his praise of that country and its development model. Chinese companies reciprocated by funnelling most of their investments in India into the State of Gujarat. Most of the $900 million that Chinese companies had invested in India before 2013 went to Modi’s home state.

After taking over as Prime Minister in 2014, Modi gave the impression that his main focus was on the Indian economy, and there was a hope that Sino-Indian relations would improve. China was the only country which had the wherewithal to pour in foreign direct investment (FDI) into India in a big way and have a decisive impact on the economy.

Initial bonhomie

The Chinese newspaper Global Times hailed Narendra Modi’s national ascendancy, predicting that the new Indian Prime Minister “was ready to do business” with China. Many Chinese commentators claimed that Modi’s right-wing nationalist views could turn out to be an advantage. They compared him to Richard Nixon, the right-wing United States President who had reached out to China and helped its rise to the high table of international diplomacy and politics. In the phone call exchanged between Chinese Prime Minister Li Keqiang and Modi after the latter’s electoral victory, both sides pledged to further enhance cooperation, especially in the economic arena.

Modi told Li that “developing relations with China was one of the most important tasks of Indian diplomacy” and that his government attached “great importance” to India-China relations. Li reciprocated by saying that China was ready “to enhance mutual trust” and that he regarded India’s speedy economic growth as an opportunity for China.

From the outset, the Chinese side has been saying that it wants to cooperate with India, especially on the plans to develop the Bangladesh, China, India and Myanmar Economic Corridor (BCIM-EC). The Chinese side conveyed to the Modi government that it very much wanted India to be a part of its ambitious Belt Road project which would help integrate the Asian economies.

Chinese President Xi Jinping was among the first world leaders to visit New Delhi after Modi became Prime Minister. During his September 2014 visit, President Xi even broke with protocol to first go to Ahmedabad where he was hosted by Modi. Before his visit, Xi said in a special article that the combination of China as the “world’s factory” and India as the “back office” could be the two engines that would drive the world’s economy. The two leaders were shown holding hands on the banks of the Sabarmati river.

But even as the Chinese President was being serenaded in Ahmedabad and Delhi, the unresolved border issue cropped up in an untimely fashion. A face-off had erupted between Indian and Chinese soldiers along the Line of Actual Control [LAC] on the Ladakh border with China. The Indian side blamed the Chinese army for the provocation. However, observers were left wondering about the timing of the incident, as it coincided with the Chinese President’s visit to India. The last thing the Chinese side wanted was to divert the attention from their President’s state visit to random incidents along the border.

During the Xi visit, China had pledged to invest heavily in India’s infrastructure programmes. Prime Minister Modi paid a return visit to China in 2015. But despite the apparent bonhomie between the two leaders, the strain in the political relationship was beginning to show.

Pro-American tilt

It did not take much time for China’s illusions about Modi to evaporate. India’s pro-American tilt, which had begun under the previous Manmohan Singh government, was further accentuated under Modi, despite India being a member of the BRICS [Brazil, Russia, India, China and South Africa] grouping. The BRICS grouping is supposed to be a trendsetter for the multipolar world that many predict will come sooner than later. But the Modi administration preferred to put most of its eggs in the American basket. The Obama administration’s military “pivot to the East”, which was a blatant attempt to encircle an emerging China, had New Delhi’s support. While on an official visit to Japan in 2014, Modi spoke about the need for some countries to change their “expansionist mindset”. At the time of the visit, Japan, along with some South-East Asian countries, had been crying hoarse about Chinese expansionism in the South China Sea.

The Modi government has given up all pretence of pursuing a policy of “strategic autonomy” which previous Indian governments claimed to have adhered to. It seems more keen to transform India into “a frontline state” in the looming confrontation between the West and China. New Delhi has already given refuelling and basing facilities to the U.S. military. In return, the U.S. has designated India as a “Major Defence Partner”, making it eligible for advanced weapons purchases from Washington.

The Chinese side is particularly unhappy with the participation of the Indian armed forces in annual trilateral Malabar naval exercises with the U.S. and Japan. It started as a quadrilateral exercise in 2006 with Australia as the fourth partner, but pressure from China forced the Australian government at the time to withdraw from the exercises after the first year.

The head of the U.S. Navy’s Pacific Command recently revealed that the U.S. and Indian navies were sharing information about the movements of Chinese submarines and ships in the Indian Ocean. This year’s Malabar exercises, held in the second week of July in the Bay of Bengal, focussed on war games targeting Chinese ships and submarines capable of sliding stealthily into the Indian Ocean through the Malacca Straits. The Malacca Straits are a “choke point”, connecting the South China Sea to the Indian Ocean. This year’s exercise was the largest held so far, with aircraft carriers of all the three countries participating.

After their meeting in Washington in June, President Donald Trump and Modi vowed to further expand the “global strategic partnership” between the two countries. In a provocative move, India has also taken Washington’s side in the South China Sea dispute, at a time when most of China’s neighbours in the region have preferred to keep a low profile on the issue. The Philippines, which is a party to the dispute, now wants to negotiate a settlement with China.

Further, India has not so far mellowed on its stance on China’s Belt Road initiative, despite all the other countries in the region, barring the exception of Bhutan, signing up and joining the grouping. Even Japan and the U.S., which had criticised the Belt Road initiative, sent high-level delegations to the One Belt One Road (OBOR) summit in Beijing held in May this year. India’s main objection to OBOR is related to the ambitious China-Pakistan Economic Corridor (CPEC), an important component of the Belt Road initiative. China plans to invest more than $40 billion in CPEC and has developed the Gwadar port in Pakistan, which will serve as an important export hub. Such a large infusion of funds will no doubt bolster Pakistan’s ailing economy. However, India has based its objections to the CPEC project because it passes through the disputed territory of Gilgit-Baltistan. Incidentally, India had not objected when China built the Karakoram highway through the same area earlier. China has repeatedly stressed that the route of the CPEC does not in any way reflect a change in China’s Kashmir policy.

New Delhi is angry with Beijing, and holds China responsible for blocking its membership of the prestigious Nuclear Suppliers Group (NSG). The Obama administration had assured India that it would facilitate its entry into the NSG, taking China for granted. The Chinese position is that entry into the NSG is by consensus and has signalled that if its “all-weather ally” Pakistan is also allowed to join, it will drop its objections to India’s membership.

The other issue which the U.S. and India jointly pursued was to put the Pakistani militant Masood Azhar on the United Nations’ “terror list”, again without consulting China, a permanent member of the Security Council. Given Pakistan’s sensitivities about the issue, China has not obliged despite Prime Minister Modi personally raising the topic with President Xi. China and Pakistan are cooperating in counterterrorism operations.

In the three years that the NDA has been in power, New Delhi has tried to up the ante on the Tibetan issue. It has allowed the Dalai Lama to make a high-profile visit to Tawang in Arunachal Pradesh. While Tawang holds a special place in the heart of Tibetans, China wants Tawang to be part of Tibet and has conveyed that its return could provide the solution for the long-festering boundary problem between the two countries. Another Tibetan spiritual leader, Ogyen Trinley Dorje, the 17th Karmapa, who was initially viewed with suspicion by New Delhi but has been allowed to move freely all over India except Sikkim, also made a highly publicised trip to Arunachal Pradesh. Even as the Doklam standoff was under way, there were reports that Lobsang Sangay, Prime Minister of the Tibetan Government-in-exile, had hoisted a Tibetan flag on the banks of the Pangong Tso lake in Ladakh. The LAC between India and China runs through the middle of the lake. The spokesman for the Tibetan exiles in India claimed that this was the first time a Tibetan flag was hoisted on Indian soil. He pointed out that the lake is shared between Tibet and Ladakh.

The Chinese side was also not happy with the Indian government giving permission to Tibetan and Uighur dissidents to attend conferences organised by pro-government think tanks in Delhi. Beijing is also closely observing the growing links between India and Taiwan. China considers Taiwan as one of its provinces, and reacted furiously when President Trump initially tried to deviate from the long-established “One China” policy of the U.S.

Burgeoning trade & cultural ties

Despite the stormy political headwinds buffeting the relationship, China remains India’s biggest trading partner. India is a member of the New Development Bank (NDB) co-owned by the BRICS countries, and was among the first countries to join the China-led Asian Infrastructural Investment Bank (AIIB), which is being projected as a rival to the World Bank. Trade between the two countries is expanding annually at 15 per cent since 2007. At the same time, India’s trade deficit with China is also increasing. It currently stands at $51.1 billion. According to many Indian analysts, the Indian government has failed to effectively explore the huge Chinese market or promote policies that would attract Chinese capital inflows.

Chinese companies have already invested more than $30 billion in India, mostly in the automotive and consumer electronics sector. The Chinese company Vivo outbid large Western multinationals to bag the sponsorship deal for the next IPL cricket tournament in India. The Alibaba group, one of China’s biggest companies, is the largest investor in the Indian e-commerce firm PayTM. The Shanghai Urban Construction Group, another leading Chinese company, has a joint venture with the Indian firm, Larsen & Toubro. Indian companies, on the other hand, seem to be more interested in investing in the West than in the booming Chinese economy.

Despite the occasional bouts of tension between the two countries, India has grown to be an attractive tourist destination for Chinese travellers. There is a religious revival of sorts going on in the Chinese mainland, and Buddhist places of pilgrimage are becoming popular. Several Chinese multibillionaires are followers of Tibetan Buddhism and make regular trips to meet spiritual leaders from Tibet based in India. But as the Doklam standoff continues, a few roadblocks in trade ties seem to be emerging. Trade talks between the two sides are currently deadlocked. The issues relate to China’s imports of bovine products, rice, fruits and vegetables from India and its exports of fruits and dairy products to India. Indian officials have been complaining of lack of access for the country’s bovine meat to China, at a time when the government in Delhi is cracking down on the country’s meat industry. The Chinese are unhappy with India’s ban on its milk and dairy products.

The Indian political establishment, while continuing to view China as a rival for influence in the subcontinent, is aware that peaceful coexistence is a better option than waging war simultaneously on two fronts. The burgeoning business and cultural ties between the two countries are an illustration. The Indian actor Aamir Khan is said to be a crowd-puller in China. The last couple of his movies have generated millions of dollars at the box office in China.